"Nortel is a major source of business for India, so that's a matter of concern to us," Mr. Mehta said. Still, he noted that the software industry association had surveyed 185 companies that assign outsourcing contracts to Indian companies and had found that few planned to scale back their business. Indeed, DuPont recently committed itself to a $150 million outsourcing contract.

Mr. Mehta added that Indian business leaders would travel to the United States later this year to ask more than 300 companies that have not yet ventured to India to consider sending projects here. The road show will include testimonials from executives of companies that are active here, as well as a fashion show featuring winners of Indian beauty contests. "We want to sell software and soft wear together," Mr. Mehta said. In addition to low costs, India has earned a reputation for high quality in software code writing. Experts say that with an English-speaking population and technical colleges that turn out more than 73,000 graduates a year, India is on track to be one of Asia's top technology powers.

Much of that talent is in Bangalore, a city of six million ringed by lush technology parks. The Indian government views technology as the crucial engine of its economic growth and has exempted it from many of the import and export restrictions that other industries here face.

But favorable regulations cannot shield Indian companies from the tribulations of its customers. The collapse of Internet companies in the United States has caused layoffs of thousands of skilled software engineers. That poses a threat to one of India's most basic businesses: the so-called body shops that supply contract software writers to American companies. Mr. Mehta said with so many code writers on the street, few companies would need to import people from India. Among other vulnerable companies are those that derived many of their sales from Internet start-ups that have fallen on hard times.

Some executives say the slowdown in the United States will have a salutary effect on the Indian industry, which has become complacent after growing 50 percent a year for more than a decade. "It's a good reminder for us not to take what we have for granted, or to become too greedy," said Ashok Soota, a longtime industry executive who recently started a software services firm, Mind Tree Consulting.

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Can India Retain Its Reign As Outsourcing King? 28 February 2001, Forbes magazine, By Todd Jatras

NEW YORK - Hardly a day has passed in recent months without an announcement from a major international corporation that it is outsourcing software development to India or investing in building its own software development center there.

Just today, for instance, France-based Cap Gemini Ernst & Young, the world's fifth-largest information technology services company, opened a new development center in a suburb of Bombay that will house 250 engineers. "We are really looking at this as a stepping stone to build a much bigger presence in India," said the company.

Major Indian outsourcing announcements have come fast and furious recently: IBM will open a Linux research lab employing 500; Nortel Networks, which already has 1,300 developers in India, will spend $350 million in the next three years and employ 500 additional research and development scientists; Cisco Systems will spend $200 million on a development center; and Deutsche Bank is dropping $4.3 million to build a 50,000-square-foot development center that will eventually house 550 software professionals.

India is clearly on a roll - but how long can it hold onto its crown? With the National Association of Software and Services Companies predicting $6 billion in software exports this year (up from $4 billion last year) and $50 billion by 2008, some are starting to question whether India can maintain its competitive edge. Low-cost technology centers in China, the Philippines, Russia and Pakistan are sprouting up and competing for outsourcing projects, making it increasingly unlikely that India will reach that lofty goal.

The Information Technology Association of America, an industry trade group, estimates that some 840,000 information technology (IT) jobs in the U.S. will go unfilled this year. Those jobs, for a first-year graduate, start out with typical salaries of $45,000 to $50,000 and rapidly escalate. The offshore software outsourcing industry will no doubt continue its hyper-expansion in the next few years as Western firms look for cheap offshore talent to fill that gap, but it is clear that India could stumble and lose its crown.

According to Marty McCaffrey, executive director of Salinas, Calif.-based Software Outsourcing Research, India will likely face troubles ramping up to the projected 2008 level. He estimates that India would need to have 1 million qualified software engineers to support exports of $50 billion, and the country currently graduates around 110,000 computer science students a year. With a dearth of experienced project leaders already on the horizon, that problem will reach a crisis point as outsourcing continues to expand at a rate of more than 50% a year. Additionally, many of India's best and brightest will continue migrating to the U.S. in search of higher wages.

When and if India does slip, there are plenty of low-wage countries that would be only too happy to pick up the slack.

International Software Outsourcing Industry
Country	Trained professionals	Software Exports
India China Russia Pakistan Phillipines	300,000 35,000-400,000 3,000-4,000 23,000 30,000-50,000	US$ 6 billion US$ 1 billion unknown US$ 120 million unknown

Pakistan, for instance, has sought to emulate India's success by offering similar tax breaks for multinationals and is aggressively modeling their own educational programs in computer and information sciences on India's.

While China would seem to be the biggest threat, with 400,000 software professionals, only 35,000 of them are qualified to do the kind of high-level, systems-integration projects that are so coveted in India. Most of China's high-tech laborers are well qualified to work on software applications maintenance and migration projects, and these workers come at a significantly lower salary than do their Indian counterparts doing the same work.

The Chinese environment has traditionally been grounded in manufacturing and hardware, but that appears to be changing, and the Chinese government has recently placed great emphasis on teaching English to students and IT workers, which is an extremely important skill requirement for American firms looking to outsource.

India has already been extensively educated in that critical language skill set, but perhaps not to the extent of the Philippines, a former American colony, where American culture and language is widely emulated. According to some analysts, those cultural and communications skills could prove to be so appealing to American firms that they would outweigh slightly higher labor costs in the Philippines.

As far as Russia is concerned, McCaffrey calls the situation there "murky." After the fall of the Soviet Union, there were more than 1 million registered engineers, but many of them have since retired, been out of work for long periods of time or don't have the necessary skill sets. Nevertheless, McCaffrey praised Russia's university programs in physics and mathematics and noted that the country has "tremendous outsourcing potential" as an alternative to India. While top-notch talent falls into roughly the same price range, programmers can be found in areas outside of Moscow for as low as $3,000 a year per programmer.

Those countries, along with a host of others such as Indonesia, Malaysia, Thailand and even Vietnam, will collectively challenge India's IT prowess in the next few years. Projects that last year and this year went to Bangalore, India's hi-tech center, might well be going to Manila and Guangzhou, China.

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E-commerce in India 15 March 2001, ASIA BIZ TODAY

In 1999, Indian Central Vigilance Commissioner N. Vittal called on his nation's government to facilitate e-commerce by keeping it tax-free for at least another decade, as well as highlighting the need for a legal framework for e-businesses. In June 2000, he got at least part of his wish when President Narayanan signed the IT bill into law. This bill legitimizes electronic signatures and e-transactions - a crucial step in encouraging businesses to develop an online selling presence - as well as providing for a network of special tribunals to judge cases of misuse. By providing a legal framework for online transactions, the Indian government has removed a major barrier to participation in e-commerce.

The greatest obstacle in the way of e-commerce in India is the low rate of PC and Internet penetration. There are currently fewer than one million Internet connections although the number of users is estimated to be 7.5 million by 2003, according to International Data Corporation. A recent reduction in telecom prices is expected to help more Indians reach the Net, and a further reduction in charges is proposed by 2002.

In addition, the cellular telephone market in India is the fastest growing in the world, with 750,000 subscribers in 1997, only two years after the launch of services. As the number of cell phone user continue to grow, one can expect growth in WAP-oriented sites. Though phone penetration is currently only between 10-12 million, with many remote, hilly, and tribal areas receiving no service at all, the outlook is good for greater connectivity; the Indian Department of Telecommunications predicts that India will have between 50-60 million phone lines by 2005.

A recent NASSCOM study indicates that 2000-01 e-business transactions will exceed Rs. 3,500 crore, split about 90/10 between B2B and B2C transactions, respectively, with substantial growth rates in the future. These transactions can take place in such formats as EDI/Intranet (limited access transactions), online malls, specialty stores, and portals, which are increasingly focused on local content. Successful ventures in the B2C category include Baba Bazaar and India Mart; B2B sites include NetVisions, an e-business solutions provider, Digisoft, which sells web services, hardware, and software, and InfraSoft, a site specializing in banking software.

An Asia.internet.com article of November 2000 speculated that revenue from e-commerce transactions in India will hit $2.17 billion this year, from $1.4 billion last year. This explosive growth will maintain the current 50% annual growth rate of the Indian software sector, including an expected doubling of software exports by 2002, according to Bloomberg.

In other areas of information technology, India is becoming known as a country to watch. Foreign companies are beginning to recognize India's value for sourcing software work, countering the so-called "brain drain" with domestic jobs for high-skilled workers. Indian software exports reached $5.5 billion in 1999, and are projected to hit the $30 billion mark by 2008.

Though global tech stocks have experienced a sharp devaluation of late, India still represents a good investment due, among other reasons, to its place on the development curve. The industry has yet to mature, and thus investors recognize opportunities to grow not only through exports, but through supplying Indians with the products they will begin to demand as the nation becomes more "wired".

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Israelis declare Sabbath on Indian IT pros
2 March 2001, Economic Times, Prasenjit Bhattacharya

New Delhi: WHILE the world clamours for Indian software engineers, Israelis are determined to keep Indian software engineers at an arm's length. The Israeli central bank as well as people in the higher echelons of the Israeli industry are opposing the entry of Indians into Israel’s staff-strapped hi-tech sector.

In a report published at the end of last quarter, Bank of Israel recommended penalties, like levying special taxes on employers of foreign labourers (among others, Indians). The central bank bluntly says: "In our opinion, the proposal from leading companies in the hi-tech sector for absorption of Indian software engineers and programmers must be rejected." A brilliant argument that the central bank gives against bringing in foreign workers in the hi-tech sector is that "there exists a fear that information can flow out". The bank has also said the award of work permitted to Indian employees would lead to "brain-drain" from Israel.

However, the Israeli hi-tech industry is learnt to be lobbying hard for bringing in Indian software engineers into the country, since Israel is facing a crunch of around 10,000 software engineers. According to Nasscom president Dewang Mehta: "Although I am not aware of the Israeli case, I feel that it is the right of every country to decide whether or not they want Indian engineers. It’s a completely free market."

Government sources in India, however, say the lack of Indian software engineers in Israel has led to Israeli companies seeking alternative routes to access Indian engineers. "Many Israeli companies have now taken to stationing Indian software professionals in Cyprus. Israeli companies, like Comverse and Amdocs, have already done so." Sources also added that some Israeli software companies had opened development sources in India, especially in Pune.

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